Question: When Sydney Airport (SYD) announced that they might not exercise their option to develop Badgerys Creek airport, the share price fell to under $6. If SYD decides that the business case doesn’t stack up and does not take up their option, what’s the likely effect that will have on the share price? If they do take up the option, what will be the effect of that?
Answer (by Paul Rickard)
The $64 question!
My sense is that if Sydney Airport does decide to take up the option, this will be more share price negative than if it decide to pass. The thinking behind this is that it will raise the spectra of a capital issue to help fund the investment.
Longer term, of course, it could be a real positive for Sydney Airport, however markets will worry more about the more immediate issues of raising capital/borrowing money and the development risk.
Question: I refer to the James Dunn article in the Switzer Super Report on the 6th of February this year, where he mention consensus on CIMIC at $34.94 and Genworth at $3.19. Both are wrong. It seems to me that CIMIC over the last year has been underestimated by analysts.
Answer (By Paul Rickard) Yes, the broker analysts do sometimes get it wrong – and sometimes, quite wrong.
Over the last few years, they have been consistently wrong on CIMIC. Among other things, they don’t like that via Hochtief, ACS controls almost 70% of the company – so they question its independence.
The individual broker range is huge – from $42.50 by Macquarie down to $12.40 by Morgan Stanley. Yes, $12.40! Current consensus is $28.50.
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